Saturday, June 6, 2009

Ripples In Developer Sales Lift Secondary Market

Source : The Business Times, June 5, 2009

817 resale units change hands in April, compared to 853 in Q12009

THE recovery in private home purchases in the primary market (developer sales) has rippled over to the secondary market.

The number of resale private apartments and condominium units that changed hands in April this year alone was 817, almost the same as the 853 resale units sold in the first three months of this year.

Subsale transactions of non-landed private homes also gained momentum with 275 caveats in April, nearly 70 per cent of the Q1 2009 volume of 404 units, according to DTZ's analysis of URA Realis caveats information as at May 29.

The Q1 caveats for condos/apartments bought in the subsale and resale markets already represented quarter-on-quarter increases of 52 per cent and 20 per cent respectively.

Subsales and resales are secondary-market transactions. Subsales involve projects that have yet to obtain Certificate of Statutory Completion (CSC) while resales relate to projects that have received CSC. Typically, a project obtains CSC three to 12 months after it receives Temporary Occupation Permit (TOP).

Putting things in perspective, DTZ's head of SEA research Chua Chor Hoon recalled that the pick-up in primary-market transactions began with the launches of Caspian and Alexis condos in February. By April, the action had spilled over to the secondary market, where buyers have prospects of picking up a completed property for immediate occupation or for leasing.

Says DTZ executive director Ong Choon Fah: 'During the initial stages of the volume recovery, individual sellers were not that aggressive in pricing. It's only when the buying momentum developed that they got bolder in asking prices.

'For some owners, if they don't get their price, they'll probably lease out the apartments for now.'

Knight Frank executive director (residential) Peter Ow reckons that if owners jack up prices too fast, buyers may pull back and this could lead to slower activity again in the secondary market. Potential buyers may then prefer to shop for homes in the primary market.

'Developers generally do not increase their prices too much for their project launches, as they have more stock to sell, compared with individual owners trying to offload one or two units in the secondary market,' he added.

But market psychology may be hard to predict and some potential buyers may sense an urgency to buy for fear of missing the boat again, he added.

DTZ's data showed that median subsale price of City Square Residences, One Amber and The Centris eased 2 to 5 per cent in Q1 over the preceding quarter, smaller declines compared with drops of 3 to 14 per cent in Q4.

However, for upper mid-tier projects, there were double-digit quarter-on-quarter declines in prices. Median prices of The Sail @ Marina Bay and Rivergate both slipped 15 per cent to $1,321 per square foot (psf) and $1,200 psf in Q1. In Q4, median subsale price of The Sail slipped 9 per cent while that of Rivergate, which is near the Singapore River, appreciated one per cent.

Resale prices of private homes in the prime districts were more resilient, with an average price fall of 3 to 4 per cent in Q1 2009.

DTZ's analysis also showed that subsales accounted for 14 per cent of non-landed private residential deals in Q1 2009, down from 18 per cent in the preceding quarter and the lowest subsale share since Q1 2007. The fall in subsale proportion in January to March 2009 was due to a bigger quarter-on-quarter jump - in fact a tripling - in caveats lodged for apartments/condos bought in the primary market in Q1.

The highest subsale activities were registered for projects that had been granted TOP since Q3 last year or are likely to obtain TOP this year. There were 43 subsale deals for City Square Residences at Kitchener Road from January to March 2009, making it the top subsale project in the period, followed by The Centris in Jurong with 40 subsales, One Amber in Katong (23 deals), and the The Esta and The Sail @ Marina Bay (19 units each).

Looking ahead, CB Richard Ellis executive director Joseph Tan said Rivergate is likely to top the subsale charts in Q2, when about 100 units owned by entities linked to Ferrel Asset Management were put on the market at about $1,300 to $1,600 psf. The units are said to have been substantially sold.

DTZ's Ms Chua reckons that interest in the subsale market will continue given that about 11,000 new private homes are slated for completion this year according to government data.

'Investors who don't want to be tied down with financial commitments upon TOP of the projects, especially those who bought on Deferred Payment Scheme, will choose to sell their units as the flagging rental market will further weaken their holding power,' she added.

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